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ARE YOU AUDITING YOUR INVOICES AS CLOSELY AS YOU COULD BE? FIND HELP ON PAGE 18

MARCH-APRIL 2019

REDUCE THE IMPACT

SURCHARGES HAVE ON YOUR BOTTOM LINE PAGE 28

TOP KPIS TO KEEP IN MIND AS YOU STRIVE FOR WAREHOUSE OPTIMIZATION. PAGE 32

DOES YOUR DATA SUPPORT THE IMPLEMENTATION OF A NEW DISTRIBUTION CENTER? PAGE 40

PARCELindustry.com


CONTENTS /// Volume 26 | Issue 2

18 26 30 36 40 06 EDITOR’S NOTE Staying Ahead of the Curve By Amanda Armendariz

08 SPEND PERSPECTIVES Shippers Pass Along Additional Costs as Tariffs Bite into Earnings By John Haber

10 OPERATIONAL EFFICIENCIES Back to the Basics By Susan Rider

12 SUPPLY CHAIN SUCCESS Rate Increase Pitfalls By Baris Tasdelen

14 GUEST COLUMN: THE FUTURE OF 3PLS 2019 Could Mark a Key Inflection Point in the Evolution of the 3PL Business Model By Ravi Shanker

16 THE IMPORTANCE OF AUDITING FREIGHT SPEND By Chris Ferrell

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26 SURVIVING THE E-COMMERCE EXPLOSION REQUIRES A CONNECTED SUPPLY CHAIN By Dan Clark

28 COST-SAVING TIPS TO MINIMIZE PARCEL SHIPPING SURCHARGES By Ivan Brewington

30 5 TIPS FOR MAKING RETURNS PROCESSING SMARTER, MORE EFFICIENT, AND COST-EFFECTIVE By Rafael Zimberoff

32 THE TOP KPIS TO KEEP IN MIND WHEN OPTIMIZING YOUR WAREHOUSE By Ed Romaine

36 DIMENSIONAL WEIGHT: STILL A COST PROBLEM FOR MANY SHIPPERS By Jack Ampuja

40 LEVERAGING DATA TO PROPERLY INTEGRATE A NEW DC By Will Bullington

46 WRAP UP The Power of Personal Relationships By Michael J. Ryan

SPONSORED CONTENT 18 SHOULD YOU BE DOING PARCEL AUDITING? 43 THE BOX IS NOW THE STORE 45 SEE SOMETHING. SAY SOMETHING. Choosing An Audit Partner By Hannah Testani


PARCEL PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ amanda.c@rbpub.com ]

EDITORIAL DIRECTOR ALLISON LLOYD [ allison.l@rbpub.com ]

AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ rachel@rbpub.com ]

CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ ken.w@rbpub.com ]

P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com

Why stop at parcel, GTMS solutions are for all modes all carriers GTMS Spend Management/Auditing RFP Assistance

GTMS provides its customers with RFP support, benchmarking, data analytics and KPI’s to measure the success of all your logistics

What makes GTMS a better solution

GTMS has assisted hundreds of clients with cost savings not only through RFP but through your data creating  Smarter Shipping Habits  Controllable Cost Monitoring  Carrier Cost and Performance

Audit PARCEL (ISSN 1081-4035) is published 7 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2019 © by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to qualified recipients: $12 per year to all others in the United States. Subscription rate for Canada or Mexico is $35 for one year and for elsewhere outside of the United States is $55. Back-issue rate is $5. Send subscriptions or change of address to: PARCEL, P.O. Box 259098 Madison WI 53725-9098 Allow six weeks for new subscriptions or address changes. REPRINTS: For high-quality reprints, please contact our exclusive reprint provider, ReprintPros, 949.702.5390, www.ReprintPros.com.

 Line item detail audit  Parcel/LTL/TL International air/ocean  Weekly carrier remittance  GL Coding / Cost Allocation

Best in Class TMS (Transportation Management System) GTMS creates significate spend reduction while creating ‘win triangles’ by optimizing the speed/cost relationship on all shipments  Multi-Modal rating and routing  Desktop Solution  Batch Rating  Carrier Notification  Advance Ship Notification  Cost Plus Modeling

Call Us Today: 855.884.3555 | www.gtms.us MARCH-APRIL 2019  PARCELindustry.com 5


EDITOR’SNOTE

EDITOR’S PICK

STAYING AHEAD OF THE CURVE By Amanda Armendariz

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ecently, I was invited to moderate a panel discussion during an industry webinar, and I found it to be an enlightening exercise. We all know that the small-package industry is changing at a rapid rate, thanks to the enormous growth of e-commerce, the expansion into a global marketplace, and an ever-increasing list of consumer demands related to their packages’ shipping speed, return options, and environmental sustainability. Shippers may feel like it’s difficult to even tread water,

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let alone stay ahead of their competition. But in this day and age, companies who don’t continually wow their customer base will find these customers lost to a competitor. During the panel, the speakers discussed a variety of different ways to combat these changes and come out ahead, as well as what trends are currently hot in our sector. While we discussed a variety of different topics, one thing stood out to me: It’s crucial to know your data. It doesn’t matter how good an idea is; if it’s not backed up by the numbers, it will be difficult to make the case that this is the best strategy for your organization. So, it’s no surprise, then, that this issue of PARCEL really drives home the importance of capturing and analyzing your data. Whether you are looking to create a new distribution center in order to shorten delivery time, or you have been thinking that you need to undertake the task of auditing your carrier invoices, this issue is a must-read for anyone who is looking to strengthen their competitive edge in this rapidly changing industry. We hope you find it helpful. As always, thanks for reading PARCEL.

Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!

Clearing the Last-Mile Hurdle Raises Prospects for Profitability By Todd Benge

2019 UPS and FedEx Rate Changes: A Side-by-Side Comparison By Rebecca Lannon

Shippers’ New Priority: Sustainability By Steve Brandt


SPENDPERSPECTIVES

SHIPPERS PASS ALONG ADDITIONAL COSTS AS TARIFFS BITE INTO EARNINGS By John Haber

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hippers are breathing a sigh of relief as the latest round of tariff increases have been delayed indefinitely. Effective September 24, 2018, the US government enacted a 10% tariff on $200 billion worth of Chinese imports. Starting January 1, 2019, the level of the additional tariffs was to have increased to 25%. However, the tariffs were delayed until March so that the US and Chinese governments could come to an agreement concerning their trade dispute. And now, instead of 25% tariffs, shippers are faced with 20% tariffs on a long list of Chinese imports. However, even that may change if US and China negotiations prove successful. As of the writing of this article in early March, the Wall Street Journal reports that China is offering to lower

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tariffs and other restrictions on American farm, chemical, auto, and other products, while the US is considering removing most, if not all, sanctions levied against Chinese products since last year. A formal agreement could be reached at the end of March. It could also include speeding up the timetable for removing foreign-ownership limitations on car ventures and reducing tariffs on imported vehicles to below the current auto tariff of 15%. This would be great news for the US automobile industry, whose supply chain reaches around the world. A recent study by the Center for Automotive Research found that under a scenario where the USMCA (the renegotiated NAFTA awaiting government approval) is implemented in its current form, other tariffs continue unmodified, and the Section 232 auto and auto parts tariffs are imposed except on Canada, Mexico, and South Korea, the following will likely occur: } A total of 366,900 US jobs will be lost. } US light-duty vehicle prices will increase by, on average, $2,750. } US new light-duty vehicle sales will drop by 1,319,700 units per year. Trade and tariff impacts on supply chains are damaging for industries and individual companies’ bottom line. In 2018, the US government made good on threats and promises with the implementation of tariff hikes beginning

early in the year for not only Chinese imports but also steel imports from the EU, Canada, and other countries. By September, tariffs on Chinese imports had increased to 20%, and the list of affected Chinese imports had grown as well. Countries impacted by US tariffs retaliated and implemented tariffs on US goods. The result has been damaging to shippers. } Tesla noted that tariffs on Chinese parts could cost the company $50 million in its fourth quarter alone. } According to Ford’s CFO, metals tariffs took about $1 billion in profit from the automaker. } Fortune Brands Home & Security Inc. said tariffs are expected to cost it $2 million to $3 million in the fourth quarter. For some shippers, such as Mohawk Industries, an American flooring manufacturer, price increases have been announced to cover both the tariffs and other rising costs. The company also has revamped supply chains. Another manufacturer, the aforementioned Fortune Brands Home & Security Inc., also noted that it is changing its supply chain and focusing on locations, such as Mexico, that are unaffected by tariffs. Steve Madden is also raising prices as a result of the tariffs and “aggressively” moving production out of China as fast as possible. However, moving production away from China is easier


said than done. Shifting production can take years to complete. Firms need to secure funding, find the right suppliers, and sort out new logistics, all while dealing with new legal and accounting issues in a country they may not know well. Having strong supply chain partners can be beneficial in such moves. Such partners can serve as trade consultants who are often knowledgeable on trade regulations, infrastructure requirements, and partnering and working with local logistics providers as needed. The uncertainty in global trade relations has sparked a strong demand for supply chain expertise. Before the delay of the 25% tariff, shippers ordered goods early and in large quantities to avoid the additional tariff increase. The result was record imports for several ports, including the two largest, Los Angeles and Long Beach, each ending 2018 with twenty-foot equivalent unit (TEU) increases of 1.2% and seven percent, respectively. Combined, these two ports handle almost half of all US imports from Asia. Thanks to the Panama Canal, East Coast ports also benefited from record volumes; the port of Savannah reported an increase of 8.7% in TEUs, and Charleston

reported a 6.4% increase. The effects of the existing tariffs extend beyond the ports and to the transportation networks and warehousing operations. Already faced with a healthy economy and strong customer demand, trucking and rail operators witnessed capacity constraints that resulted in increased rates. Not only did shippers have to pay more for their imports, they also had to pay more in transportation once the goods cleared customs. If that wasn’t enough, warehousing space to store the extra inventory also has reached beyond capacity levels as many shippers have

opted to carry additional inventory in warehouses. From end to end, supply chains are facing increasing costs as they encounter disruptions such as tariffs, and supply chain risks will only increase. Today’s environment is highly volatile as political, environmental, and competitive risks are increasing supply chains’ need to be agile, quick to respond, and adaptable to meet the needs of customers.

John Haber is the Founder and CEO of Spend Management Experts. Contact John at solutions@spendmgmt.com.

MARCH-APRIL 2019  PARCELindustry.com 9


OPERATIONALEFFICIENCIES

BACK TO THE BASICS By Susan Rider

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ne of the most elementary but essential rules of warehousing for single-item picks is to make sure you are correctly slotting and profiling. There are, unfortunately, many distribution centers designed with only one type of storage medium for every stock keeping unit (SKU) or product. This is rarely the most cost-effective and efficient way to lay out your warehouse. Every SKU has a velocity trail, and depending on this velocity, they should be slotted in a particular type of storage medium. Some of these options are: Bin Shelving, which is the cheapest form of storage. However, be sure that you check the capacity of the shelves. This storage medium is a good option for slow movers. In other words, if your product requires first in, first out (FIFO), this is not a good choice, since during replenishment, all product must be removed and the new product put on the shelf. But if you do have a lot of slow movers, you may want to look at a bin shelving mezzanine. Make sure you invest in dividers so the product does not invade another location. Horizontal Carousels are not for everyone, but when slotted appropriately, they are a good medium and used more for

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cluster picking; never put fast movers in carousels. Replenishment is done off-cycle. Carton Flow is the most common picking medium for single-item picking. It is crucial that attention is paid to the rollers. They need to function with your type of boxes, and product needs to flow from the rear of the rack, where replenishment happens, to the front without getting stuck in between. If your boxes tend to conform around rollers, your order pickers will spend more time reaching back and clearing jams than they do picking. Dividers are important here. Many people decide to skip them, but this is a penny wise, pound foolish decision, since the box can glide to the wrong location without them. Each bay is commonly five shelves. Some try to squeeze in more shelves and forget about the height of the boxes, which also causes jams. Slotting is incredibly important on this pick medium. The fastest movers should be placed in the middle shelves. If the product is in arm’s length, with no bending or reaching required, the order filler will be able to increase productivity by over 20%. Honeycombing (sporadic empty locations) can become a problem in this medium. This often occurs when there isn’t a good replenishment model or when someone unassociated with warehouse productivity assigns new locations. The more empty locations the order filler has to walk by, the more walk time is experienced. Just eight feet of expanded walk time over an eight-hour shift

can dramatically impact productivity. However, if managed well, this pick medium can be an excellent productivity enhancer. Each location should be labeled brightly and boldly in order to increase speed of searching and decrease pick errors. This pick medium is easily expandable and flexible, and many have created twoand three-level pick modules using conveyors to transport completed picks. Pallet Flow is used when the velocity of the product is such that it requires a lot of replenishment. It is important to look at the wheels on the flow rail to make sure they are dependable and reliable, allowing the pallet to flow to the picker, and a good stop at the end of the ramp is crucial for safety. Many people just extend the single locations for carton flow using a whole shelf or two, but this isn’t a good idea, since someone will have to unload a pallet into these locations on a regular basis. A better solution is to intermix pallet flow with carton flow. Put the pallet flow in the beginning of the aisle, since the fast movers are in that location and some orders may only need the fast movers. Orders are picked and out quickly, while replenishment is done from the back and can be done throughout the day.

Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at susanrider@msn.com.


SUPPLYCHAINSUCCESS

RATE INCREASE PITFALLS By Baris Tasdelen

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PS and FedEx have been diversifying their rate increases, and these increases have become more like year-round adjustments to their service guides and pricing in the process. The majority of the press coverage goes to the end-of-the-year general rate increases (GRIs); however, the other changes have significant cost impacts, and they usually are not capped like the annual GRIs are. While the announced GRI is usually around five percent, the increases in accessorials, fuel surcharges, and new accessorials can push the overall cost increase to much higher values.

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FUEL INDICES Carriers are increasing their fuel indices even though fuel has been stable in recent years. What’s more interesting is the fact that most of these changes go unnoticed by shippers. In previous GRI calculations, fuel adjustments were part of the total rate increase. Carriers would increase their rates by seven percent, reduce their fuel by two percent, and call it a five percent GRI. UPS increased its fuel on December 31, and FedEx just increased theirs on March 18. Based on their previous practice, we should be referring to these increases as a six to seven percent jump, not five percent. This becomes even more critical when the carriers calculate capped discounts. Just to give an example, at the current rate of $1.79 for jet kerosene, the FedEx Express fuel surcharge would have been 0% in 2015, five percent in 2018, 5.75% in January 2019, and 6.75% after March of this year. The chart on the next page shows the fuel prices since 2015. Both diesel and jet fuel present a flat trend. The next chart shows the fuel surcharges at $1.79 for jet and $3.00 for diesel, which are the current prices. Basically, these are the fuel surcharges if the fuel price was fixed for the past five years, so any change is not a result of fuel price fluctuation but only an adjustment by the carriers.

SUREPOST RATES While carriers offer rate caps for most domestic and international service levels, SurePost is capped less frequently and at a higher cap. In 2019, the UPS SurePost rates went up nine percent, and most shippers received this increase entirely. On top of the transportation charges, the Delivery Area and Extended Area Surcharges for SurePost went up 32% and 23%, respectively. Since 2015, the increases are 270% and 235%. Considering that UPS does not deliver most of these packages, it sounds wrong to charge delivery area fees for these packages. What’s worse is that what was once a low-budget alternative to ground service is almost as expensive as ground but slower and has no guaranteed service commitment. FedEx’s comparable service, SmartPost, is six percent cheaper for one to 10 pounds, and the DAS/EAS charges are close to what UPS charged in 2018. MID-YEAR CHANGES TO DIMENSION SPECS Additional Handling (AHS), Large Package (LPS), and Overmax charges are becoming a bigger part of shippers’ cost. The rates and rules regarding how these charges are applied change both during the year and at the end of the year. The AHS weight surcharge, which applies to packages over 70 pounds, increased from $12 to $19 in July 2018 for UPS.


always possible because the changes are not well publicized and communicated. The 2019 GRI for UPS was announced three weeks before the increase, and that is not enough time to analyze the impact and take any meaningful action. Most of the mid-year changes are missed by the majority of shippers unless they read publications like these. The reactive approach depends on being on top of the parcel data and spend. A shipper needs to look at spending, not just as a whole, but by service level and accessorial type. ONE OTHER THING… Your parcel contract has a cap for the rate increase, so you would assume that the transportation charges would be under control; however, that’s not always the case. Carriers can make significant errors while calculating the capped rates. It is crucial that the shipper performs a GRI analysis and calculates the impact of rate sheets provided by the carrier and compares it to their contracted cap.

FedEx followed suit in September by increasing it to $20. LPS went up from $80 to $90 in July and increased again in 2019 to $95 for commercial and $115 for residential. Also in early 2018, carriers dropped their threshold for Large Package/Oversize surcharges from 108 inches to 96 inches in length. Similarly, the AHS threshold was reduced from 60 inches to 48 inches in 2017. A specialty hardware shipper who had less than one percent of its packages receiving LPS got a serious shock when its LPS

packages went up to eight percent of its total volume due to this change. What can a shipper do? There are two possible approaches: proactive and reactive. While being proactive seems to be the obvious solution, it’s not

Baris Tasdelen is Senior Transportation Analyst, enVista. He has extensive experience in negotiating parcel carrier contracts, analyzing parcel data for operational optimizations, and building and running cost models for parcel and other transportation modes.

MARCH-APRIL 2019  PARCELindustry.com 13


GUESTCOLUMN

2019 COULD MARK A KEY INFLECTION POINT IN THE EVOLUTION OF THE 3PL BUSINESS MODEL By Ravi Shanker

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018 was a record year for 3PLs but a tough year for shippers. The 3PLs were the beneficiaries of a perfect storm in the trucking market, driven mainly by the enforcement of the electronic logging devices (ELD) mandate and an exacerbating truck driver shortage. Spot rates rose an extraordinary ~30% y/y on average for the first half of the year, which led brokers to break contracts and left shippers with no option but to pay. Morgan

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Stanley’s Truckload Freight Index (TLFI), which has been a benchmark of truck market conditions for the last 20 years, soared and hit multiple highs in 2018. It seemed as though there might be no end in sight, but sentiment has gradually shifted, and the truck market began to rebalance in July/August. Truck spot rates have kept falling from their July 2018 all-time high. Most industry observers (us included) had expected an early and robust peak season to show up in the TLFI and truck spot rates (as early as early September rather than the usual early October timing) due to shipper concerns about repeating 1H18’s challenges in securing truck capacity heading into what should have been one of the strongest holiday seasons on record. However, peak season never really showed up in the data, and spot rates started sliding back toward normal.

inventories, a macro hiccup in China, weakness in the energy complex, a strong USD, and overhang from a heady previous year — all of which are factors that apply to today’s environment as well. However, more than cyclical inflections, we are monitoring potential structural shifts as well. Have shippers been so burned by the 2018 rate surge that they move away from the spot market/brokers completely to lock in dedicated capacity with asset-based carriers? It is interesting to see the rapid normalization of spot rates since July, even as contract rates remain up HSD y/y. Based on continued anecdotal conversations with shippers, carriers, and even brokers, we wonder if 2019 will be the year we see the start of a new relationship between carriers, brokers, and shippers — one that values long-term visibility and stability rather than shorter term opportunism.

Could 2019 Mark a Role Reversal from 2018? We believe 2019 could look more like 2015 than 2018. While many were expecting surging trucking supply to be the cause of the market softening, that scenario has not played out. We are instead concerned that demand is the real issue and that 2019 could be similar to 2015-16, when the transportation complex went through a freight recession even as the overall economy held up, thanks to slowing industrial production, high retail

2019 Could Also Be an Interesting Inflection in the Secular Evolution of 3PLs 2018 has been an exciting year in the space as new tech entrants (Amazon, Convoy, Loadsmart, and others) continued to ramp. Convoy, for example, raised $185 mm in a Series C financing, valuing the company at $1 billion. Clearly the new entrants are gaining momentum and the “traditional” players are not sitting still, either — see JB Hunt’s traction with their JB360 platform and CH Robinson’s technology


initiatives as well. But with digitization generally comes price transparency, democratization of information/data, and price deflation. This is great news for shippers and carriers, but what impact will it have on traditional 3PL players that are used to making 20-40% gross margins? How will small mom-and-pop players, who still make up the very long tail of this industry, be able to fight a technology war with Silicon Valley and transportation giants? Three main questions will determine if 2019 will be the year of the new digital brokers: Will they manage to gain more traction in a looser market than they did in a tight 2018? Will they be able to expand beyond Fortune 500 customers to SMEs? And lastly, will they be able to push toward their holy grail of start-to-end automation? Blockchain Is Bridging the Gap to Automation This past year, we saw Blockchain and cryptocurrencies fade from the front pages, but we also saw some interesting and critical developments with the commercial adoption of Blockchain in supply chains. In recent

months dexFreight completed its first Blockchain-based shipment using smart contracts, Walmart decided to mandate Blockchain use, and Europe’s largest port tested the technology. Although the technology is still in its early stages, we believe Blockchain has the potential to transform supply chains/logistics through enhanced visibility and automation, effectively

transforming the 3PL space as we know it today. Will this take three years, five years, or 10 years? We don’t know — but it is likely that initial steps will be taken in 2019.

Ravi Shanker is Executive Director, Morgan Stanley.

To view the full disclosure statements relating to this information, visit PARCELindustry.com/Futureof3PLmarket

MARCH-APRIL 2019  PARCELindustry.com 15


THE IMPORTANCE OF AUDITING FREIGHT SPEND With surcharges and fees increasing each year, it’s more important than ever to stay on top of your true costs vs. what you are billed.

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n 2017, the last year for which data is available at the time of this writing, parcel shipments in the US grew by eight percent year over year to about 12 billion units shipped. This means the average US consumer receives 37 parcel deliveries each year. Thanks in large part to Amazon, most customers expect deliveries to arrive at their doorsteps

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BY CHRIS FERRELL within two days. The explosive growth of e-commerce, combined with the shift in consumer expectations regarding “free” two-day shipping, has meant that carrier rates and discounts are put under ever-increasing levels of scrutiny. Rest assured, carriers like UPS and FedEx are going to get their money. The result has been a complex and growing number of surcharges and

accessorial fees that are tacked on to the price. The imposition of fuel surcharges (FSC), cube adjusted weight (CAW) calculations, residential delivery fees, peak-season delivery charges, and overweight shipping fees, just to name some of the more common ones, can add as much as 35% to a parcel freight invoice. Without a full understanding of whether a surcharge is applicable to a particular shipment or shipments, and whether or not the base rate, discount, or surcharge is correct according to the contract, shippers will be at the mercy


of the carriers to determine if the correct rate has, in fact, been invoiced. For all of these reasons, it is now more important than ever for shippers to deploy regular, comprehensive audits of freight bills. Auditing freight bills is not necessarily difficult work, but it can be tedious and requires both a thorough understanding of a company’s carrier contracts and a diligence to stay on top of the freight bills. Unfortunately, too many companies simply pay their freight invoices as submitted because they do not have the proper in-house resources to audit and evaluate these costs. Fortunately, there exists an alternative: freight auditing companies. Freight auditors specialize in helping clients re-coup money they are owed due to incorrect application of agreed-upon pricing terms, inaccurate information, and mistakes made by the carrier’s billing department. They historically recover between one percent and five percent of a company’s net freight spend. However, the benefits go far beyond the hard savings of mis-billed shipments. A comprehensive audit will identify opportunities to reduce cost through more efficient shipping, the elimination of items such as overweight parcels, and targeted geographies that will achieve the desired level of service on a lower-rated fare. Through their extensive knowledge of the industry, they also provide insight as to whether current rates are in line with what other similarly-sized clients have been able to negotiate — information that will prove

valuable when it comes time for contract renewal or when annual general rate increases are invoked by the carriers. Despite these benefits, many companies fail to incorporate this best practice into their operations, so perhaps a bit of myth-busting is in order. Myth 1: It will take a lot of time to work with a freight auditor; I may as well do it myself. The reality is that it only takes a few minutes of the shipper’s time to provide the auditor with a complete copy of the current parcel carrier contract, including all the rates, fees, and surcharges the carrier has published for the shipper as well as access to their electronic parcel carrier invoices. That is it. Myth 2: Hiring a freight auditor will be expensive. What if they do not find anything? The fact is that parcel audit services do not cost; they actually pay. Audit services are provided on a contingency fee based on a percentage of the actual recoveries achieved as part of the audit service. If there are no recoveries, there is no charge for the audit service, and the shipper can be assured that the rates they are paying are exactly the charges they should be paying for the services

offered. There are no out-of-pocket costs and no start-up costs, so there is no downside to the audit process. Myth 3: I am not a big enough shipper to need a freight auditor. Freight auditing companies take on clients of all sizes, starting with shippers who average 50 parcel shipments per week or who are spending at least $30,000 per year on parcel freight. One final note on freight auditing: The need is only going to go up from here. New carriers ranging from Amazon Delivery to traditional courier service providers to crowd-sourced startups are providing competition to the industry but present more contracts to manage. The growing demand for international shipping provides several layers of increased complexity for mistakes to be made. So, the next time you find yourself asking “Did I pay too much for this delivery?” or “Am I getting a good deal from my current provider?” consider contacting a freight auditing specialist. You have (literally) nothing to lose.

Chris Ferrell is VP Operations Planning, MonarchFx, a division of Tompkins International.

To see several of the leading auditing & spend management companies in the industry, turn the page.

Did I over-pay for this shipment? Am I getting a good deal on my rates? Is there a way I can lower my shipping costs without sacrificing my delivery times?

MARCH-APRIL 2019  PARCELindustry.com 17


SPONSORED CONTENT

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As you read in the article on the previous

SHOULD YOU BE DOING PARCEL AUDITING? If you have questions, these companies have answers to help you with your auditing and spend management.

page, auditing is a crucial task that all shippers need to undertake. However, even though it’s not necessarily a difficult task, it can be a time-consuming one, which explains why many companies may let it fall by the wayside. If you are at the point that you need to up your auditing game, check out the solution providers on the following pages.


In addition to optimizing parcel contracts, we also provide late shipment and manifest error recovery, as well as a sophisticated client portal that provides trend analysis, GL-coding, rate audit, custom reporting, and transit analysis. Typical audit recovery is up to 3% of a shipper’s annual parcel spend, with up to an additional 7%+ savings available on optimization opportunities. While we are headquartered in the US and have a powerhouse team of domestic parcel experts on staff, we also bring a passionate team of global experts that optimize parcel savings in Canada, Europe, the Middle East, and Asia. In addition to parcel spend management, we also provide savings on trucking and airfreight domestically and abroad, with typical savings also in the range of 10%-20%. Alexandretta brings our clients a unique mix of integrity, expertise, commitment, resources, skillsets, and strategy to maximize profits in the global economy. www.alexandrettaconsulting.com

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ALEXANDRETTA TRANSPORTATION CONSULTING

Alexandretta specializes in consistently driving cost savings for clients spending between $1mm-$500mm+ on parcel annually. Our expertise in the industry allows us to review every aspect of parcel data and optimize savings via detailed analytics, negotiations support, contract optimization, strategy, audit, and business intelligence. Typical savings average 10%-20%, leading to increased profits and competitive leverage for our clients. Our dedicated team of parcel experts brings over 80 years of carrier pricing and sales expertise to our clients. Regardless of client size or spend, we find savings 95% of the time, therefore providing the biggest area of opportunity for shippers to impact their parcel spend.

CASS INFORMATION SYSTEMS, INC.

Cass Information Systems, Inc. is the leading provider of freight audit, payment, and business intelligence services. Leveraging over 60 years of experience, we provide solutions to major corporations having complex transportation payment and information needs. Cass’ comprehensive parcel spend management solutions help to reduce and manage your parcel shipping expenses. Our complete parcel auditing includes duplicates, rates, manifested and not shipped, accessorials, adjustments as well as compliance and service failure audits. We also will allocate parcel spend to meet complex general ledger requirements. In addition, Cass’ web-portal provides data visualization dashboards and ad-hoc reporting to help you further manage and reduce your parcel spend. If your company ships over 100,000 packages annually, we can provide substantial savings for your company. Reduce processing expenses, stop over-

charges, accurately allocate costs, and receive critical parcel data. Contact Cass today to see how we help create a competitive advantage through reduced costs, increased efficiency, and better decision-making capability. 314.506.5836 | www.cassinfo.com

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CRUSH DATA

AI AUDITOR CrushData’s logistics software platform reduces transportation spend through auditing, carrier reporting, and rate negotiation. Our machine learning results in optimized shipping rates. Detailed and concise reporting reveals best practices and enhanced strategy tools for audit and compliance reporting. CrushData offers 100% supply chain transparency while providing full shipment and carrier accountability, resulting in complete control when it comes to making important decisions about parcel spend. Connect — Uncover — Save. www.crushdata.com

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CT LOGISTICS

CT Logistics is celebrating 96 years of supply chain management services in 2019. Since 1923, companies have leveraged CT for freight audit, payment, TMS solutions worldwide. CT customizes all solutions for our clients to support all modes, including parcel. CT's services will reduce your costs and save your company money. CT audits every shipment to recover money from your total parcel, package, and freight expenditures.  All rates and cost items are calculated, including bundled pricing, hundred weight, and dimensional pricing.  All shipments are reviewed for address, account number, COD, dangerous or restricted goods, declared value, and oversize.  All shipments, including third-party, are reviewed for inside, residential, Saturday pickup or delivery, as well as GSRs (Guaranteed Service Recoveries). MARCH-APRIL 2019  PARCELindustry.com 19


CT's services also include supply chain management, TMS solutions, LTL and Full Truckload shipment execution, bid management, shipment planning, and execution software, as well as professional services for consulting and advising. CT's business intelligent platform provides global supply chain visibility for benchmarking and trending, with graphical dashboards for management information. CT is SOCII and ISO 9001:2015 certified. www.ctlogistics.com

MOUNTAIN a GREEN TECHNOLOGY Green Mountain Technology (GMT) partners with the world’s largest parcel shippers to plan, execute, and monitor high-volume parcel networks. Our Parcel Spend Management (PSM) solution drives increased profitability and enhances the customer shipping experience through a suite of tech-enabled services. It starts with our best-in-class parcel audit and invoice automation, then leverages that data for advanced analytics, optimization, and ongoing network improvement and contract management projects. GMT’s highly engaged, strategic delivery model, unique network modeling and re-rating technology, and Fortune 500 customer base uniquely position GMT to deliver unparalleled value. Our customers represent more than $6 billion in parcel spend and consistently experience a 5-10X return, net of our fees. Our outcomes are proven by numerous customer honors including QVC's Supply Chain Partner of the Year and Office Depot's Partnership Award. Learn more at GreenMountainTechnology.com.

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GTMS CONSULTING SERVICES

What makes GTMS a better solution? GTMS has assisted hundreds of clients with cost savings not only through RFP but through their data, creating carrier cost and performance improvements, smarter shipping habits, and controllable cost monitoring. The GTMS suite of services will identify 20 PARCELindustry.com  MARCH-APRIL 2019

significant savings in your transportation spend. We provide actionable reports, full audit of all transportation modes from small parcel to air to ocean to truckload, and BI tools that benchmark savings throughout your supply chain. GTMS provides its customers with RFP support, benchmarking, data analytics, and KPIs to measure the success of all your logistics. GTMS offer best-in-class rating and routing, creating significant spend reduction while creating “win triangles” by optimizing the speed/cost relationship on all shipments. GTMS’ best-in-class TMS includes multi-modal rating and routing, desktop solution, batch rating, carrier notification, advance shipment notification, and cost-plus modeling. www.gtms.us

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INTELLIGENT AUDIT

Intelligent Audit (IA) is the technology leader in parcel and freight audit, business intelligence, and spend optimization. IA’s proprietary technology, paired with its team of strategic account managers, provides an unrivaled ability to uncover opportunities for cost reduction and process improvement. IA’s cloud-based solution addresses logistics pain points using data-driven analytics and reporting to analyze, benchmark, optimize, and help shippers gain critical insights into their global transportation networks. With best-in-class audit and reporting technology, clients are able to leverage their data to reduce costs, enhance real-time visibility, and improve end-customer experience. With more than 2,500 clients representing over $12 billion in annual transportation spend, Intelligent Audit prides itself on providing clients with the tools and insights to help them ship smarter. www.intelligentaudit.com

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LJM

With a wealth of experience in the parcel industry, having developed proprietary software to audit unlimited amounts of

small parcel, and integrating our benchmarking analytical tools, we’ve learnt the best way to negotiate your carrier agreement. It’s why we champion the parcel arena. Our long-term solutions optimize your parcel program, integrating industry best practices with knowledgeable insights from our renowned strategists and analysts. Our data-mining software supports the art and science of parcel agreement evaluation and negotiation, generating higher levels of productivity and increasing your competence. LJM shares parcel intelligence to leverage your position with the carriers. Our comprehensive invoice audit reveals your in-depth shipping profile; our team of tenured personnel retain over 200 years of combined experience within logistics, parcel management, finance, and contract negotiations. This insight and involvement have made us authorities at rate and contract negotiations. Our skillset returns cost reductions and measurable savings that will be evident in your bottom line. Serving the e-commerce industry as a professional parcel consulting firm, our goal is to provide our clients with an informed study and overview of their position as seen from the eyes of the carriers, and subsequently and successfully strategize and execute an optimal parcel program resulting in increased profits and ideal efficiency. You can control what the carriers do by the way you respond. Respond with LJM. That’s where your power lies. www.myljm.com

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REVEEL

Get More from Your Invoice Auditor Shipping invoices can be more than 100 pages and contain a myriad of codes. This can make auditing your invoices almost like trying to decode Egyptian hieroglyphics, which is why many businesses fail to do it. But even for those who do audit their invoices, recovering credits is still a headache. When you discover an error, you still have to pick up the phone and dispute the credit with your carrier. Reveel handles the entire process for


you — from identifying savings to recovering your credits. We start by providing a 45-point audit on every invoice to pinpoint areas for refunds. Our team handles the entire follow-up process by working directly with major shipping carriers to secure credits on your behalf — saving you precious time and allowing you to focus on making important impacts in other areas of the business. In addition, Reveel’s advanced reporting and analytics tools give you the power to take control of your shipping spend. With real-time reports and a comprehensive view of your data, our intuitive, easy-toread dashboards give you more information in an interactive, visual format. Since 2006, Reveel has been dedicated to providing Shipping Intelligence for the smartest business decisions possible. Founded by former DHL sales executives, Reveel was created to level the playing field. Over the past decadeplus, our zero-risk services have saved our clients millions of dollars.

See what makes Reveel unique with a free invoice audit. www.reveelgroup.com

 TRANSPORTATION INSIGHT Transportation Insight brings strategies to small-package shippers that drive cost reduction and avoidance, service improvement, and risk mitigation. With parcel and multi-modal supply chain solutions engineered from insight, the Enterprise Logistics Provider leverages data modeling, deep domain expertise in all modes of transportation, and proprietary technology to deliver an agile continuous improvement platform that drives down cost and optimizes performance. Transportation Insight’s robust parcel technology platform (audit, engineering, advanced analytics) is an integral part of how we create value for clients.

Shippers realize significant cost savings through error identification and resolution, data analysis, and small-package claims and recovery via our parcel audit and repair solution that uncovers invoice, service, and compliance errors. Backed by rigorous process controls independently audited in an annual SOC 1 Type II report, we have the auditing of complex parcel invoices down to a science. We process millions of parcel shipments weekly and perform audits to make sure clients receive the desired service at their contracted terms. As shippers face major transformation due to omni-channel, e-commerce, digitization, AI, capacity constraints and import/ export compliance risks, Transportation Insight’s end-to-end supply chain solutions deliver immediate and long-term improvements, logistics-related cost savings and enhanced efficiencies to accelerate profitable performance. www.transportationinsight.com

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TRAX

Trax is a global leader in Transportation Spend Management solutions. Combining industry-leading cloud-based applications with expert services, we are transforming traditional freight and parcel audit to help customers better manage and control their global transportation costs and drive enterprise-wide efficiency. With a global footprint spanning North America, Latin America, Asia, and Europe, we deliver data-based visibility and insights, higher savings, and better control of transportation spend for shippers of all sizes. Trax’s Total TSM solution is purpose-built as a closed loop spend management solution for transportation; combining and leveraging a best-in-class set of data management and audit capabilities with a rich set of spend intelligence solutions or Transportation Spend Intelligence (TSI). Total TSM represents the next generation of freight and parcel audit to drive the industry toward comprehensive transportation spend management to deliver the capabilities shippers require to better manage and control their transportation costs. Best-in-class analytics can transform transportation cost data into an advantage for any shipper. Trax delivers transportation spend intelligence through our TSI solution suite, enabling shippers to analyze their transportation spending and answer key questions like “What happened?”, “Why did it happen?”, and “What can I do about it?”. Whether it’s our TSI Insights solution, which captures all spending

and KPIs in a best-in-class business intelligence solution or our patent pending TSI Variance Analysis, which quickly lets you measure the changes in your spending and identify the root causes of those changes, TSI gives you control. www.traxtech.com

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U.S. BANK

To make smart decisions about your supply chain, you need powerful data in a format that’s easy to understand. U.S. Bank Freight Payment delivers actionable intelligence so you can streamline processes and find efficiencies from point of origin to the last mile. Our comprehensive solution provides a collaborative approach that will give you customized recommendations to gain greater visibility and optimize supply chain performance. We ensure complete, accurate data goes into your systems with 100% pre-payment audit to support your critical decision making. Plus, you can depend on the reliability and security of a bank that’s gone beyond regulatory, audit, and compliance requirements to earn the highest data security certification to keep your competitive information secure. Visit freight.usbank.com to learn how you can get the reliability and visibility you need to make your supply chain a strategic advantage.

a VISIBLE No one wraps up parcels quite like Vis-

ible. Founded as a fulfillment company with a single warehouse in 1992, Visible has grown to become one of the country’s leading providers of shipping, packaging, fulfillment, and logistics. Shipping 137 million packages a year, we rank second only to Amazon as a USPS reseller. The resulting bulk buying power, together with Visible’s New Blue shipping rates, saves customers up to 41.2% on shipping costs. Custom packaging services reduce their costs more, by rightsizing package dimensions and weights, based on carrier rate brackets. And four bi-coastal warehouses allow our customers to lower rates even further, by optimizing based on shipping zones. As a result, Visible now works with over 25,000 customers, shipping to almost 140 countries and territories. Its seasoned experts fulfill using proprietary technology that helps it maintain a 99.84% accuracy rate, give customers 24/7/365 shipment tracking, and a 99.90% on-time shipping record. With this kind of parcel prowess, no wonder Visible is able to help e-commerce retailers better compete with the biggest brand names out there today. "As you might gather from our name, visibility is central to everything we do, because transparency is what we believe the supply chain management industry needs to focus on, if it is to thrive. From live package tracking to crystal clear invoicing, we're proud to be helping drive the long-needed shift to smarter shipping." - Casey Adams, President www.visiblescm.com

FEATURED AUDITING & SPEND MANAGEMENT SOLUTION COMPANIES ALEXANDRETTA TRANSPORTATION CONSULTING www.alexandrettaconsulting.com CASS INFORMATION SYSTEMS, INC. www.cassinfo.com CRUSH DATA www.crushdata.com CT LOGISTICS www.ctlogistics.com

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GREEN MOUNTAIN TECHNOLOGY www.GreenMountainTechnology.com

TRANSPORTATION INSIGHT www.transportationinsight.com

GTMS CONSULTING SERVICES www.gtms.us

TRAX www.traxtech.com

INTELLIGENT AUDIT www.intelligentaudit.com

U.S. BANK www.freight.usbank.com

LJM www.myljm.com

VISIBLE SUPPLY CHAIN MANAGEMENT www.visiblescm.com

REVEEL www.reveelgroup.com


SURVIVING THE E-COMMERCE EXPLOSION REQUIRES A CONNECTED SUPPLY CHAIN By Dan Clark

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ompanies with supply chains of every variety need to be wary of trends brought about by the explosion of e-commerce shopping. Whether you’re a traditional shipper moving products from your distribution center (DC) to a brick-andmortar store or a digital storefront with a popular mobile app, e-commerce’s growth in popularity is most definitely affecting you. Rising customer expectations, demand for greater visibility, and the capacity crunch all stem, in some part, from an increased number of online orders. To deal with these trends and to compete in the new digital age, companies should streamline their supply chains from end to end. The Amazon Effect The term “The Amazon Effect” has been bandied about the industry lately. This term encompasses all the trends the explosion of e-commerce shopping has created and stems from Amazon’s takeover of the retail industry. Thanks to Amazon’s growth in popularity and promise of two-day free shipping for all

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members, more and more people are expecting this same level of treatment from other companies they buy from. Consumers are also now expecting fabulous customer service and real-time tracking for their orders. To meet these expectations for fast delivery, free shipping, and complete transparency, businesses should turn to technology to connect their entire supply chains. Start at the Beginning: Inbound Optimization Inbound is usually the first link in the supply chain. It’s also typically the area that companies tend to ignore in favor of operations that are easier to manage. However, there are lot of opportunities to save money, gain visibility, and improve order processing times if managed correctly. Managing the inbound is a challenge because it involves external vendors who may be difficult to reach. When embarking on an inbound optimization project, companies should draft a set of vendor inbound compliance standards (VICS) to establish rules and procedures for

inbound shippers to follow. This process will help to offset the cost of violations and improve supplier behavior. A routing guide can also be published to identify a set of preferred carriers. This enables pricing improvements, superior service levels, and maximum opportunities for consolidation. Bring Your Warehouse into the 21st Century The opportunities to speed up and improve operations in the warehouse and in the yard can be crucial for businesses trying to keep up with lightning-fast deliveries and customers demanding exceptional customer service. In the warehouse, companies can leverage warehouse management systems (WMS) with artificial intelligence (AI) to strategically route picking lanes. Some may go as far as employing robots to do the depalletization, sorting, and selection, which can greatly speed up the process. Other companies may opt for smaller format stores in the heart of cities so that they can reach their customers faster. In the yard, companies can track inbound and outbound shipments and


retain visibility of orders down to the level of individual stock keeping units (SKUs) with the help of RFID and GPS technology. Connected portals can allow suppliers, vendors, and receivers to collaborate in the cloud to schedule appointments at the dock. This helps keep the flow of trucks moving and helps warehouses plan labor. It also means that information can then be passed along to customers who expect to be able to view their orders’ status. Ship Fast, Ship Free Potentially the most important aspect of shipping that companies can improve through technology is their outbound operations. Whether you work for a traditional shipper or an e-commerce company delivering final mile to an individual’s home, the process of getting products out the door and to their destinations as quickly and cheaply as possible is non-negotiable. The capacity crunch that has been exacerbated by an increased number of parcel shipments means that it’s crucial for companies to secure reliable capacity early. Connecting to a global network

of other shippers and carriers can help companies find and book rates at the best price and service type. By leveraging a transportation management system (TMS) with a large network, companies save time rating shipments by viewing multiple rates side-by-side and can ensure they choose the carrier that can deliver product as quickly as possible. This combination helps businesses maintain their margin on shipments that might otherwise cost more to ship than is earned. By integrating external applications like WMSs and enterprise resource planning (ERPs) with a TMS, users can gain additional levels of visibility and connect many different aspects of their supply chains. Even without integrations to external technology, transportation management platforms offer advanced reporting and analytics, which companies can leverage to make more strategic shipping decisions. Carrier scorecards and KPIs show where there are opportunities for change, and actual freight costs can be calculated to trim waste.

customer expectations, the capacity crunch, and demand for better visibility (all of which are being exacerbated by the explosion of e-commerce), companies should find ways to connect their supply chain processes from end to end, and the Internet of Things (IoT) is making it even easier. Now, carriers can check which dock door they are delivering to from their mobile device, pickers can be re-routed automatically based on inbound deliveries, and customers can check the status of their orders in real-time. Technology like WMSs and TMSs integrate to supply information across departments so that everyone is acting based on the same knowledge. The growth in e-commerce shopping isn’t projected to slow down, so companies who want to weather the storm should connect their supply chains from end to end with the help of technology.

End-to-End Supply Chain Collaboration In order to combat the trends of rising

Dan Clark is President and Founder of Kuebix. Visit www.kuebix.com for more information. MARCH-APRIL 2019  PARCELindustry.com 27


By Ivan Brewington

surcharges also apply to rural deliveries outside metro areas. } Impact per package: $3.60 - $4.85, depending on the carrier. } Cost-saving alternative: Offer to pick up at your own store, FedEx office, or UPS Store. There is also a discount if the item is shipped to the customer’s workplace instead of their home. Fuel surcharge. The indexed-based surcharge is tied to the average price of diesel fuel as listed by the U.S. Energy Administration. } Impact per package: 6.25 - 7.75% } Cost-saving alternative: Fulfill the order closer to the customer. Options include shipping from fulfillment centers, implementing a ship-from-store model, utilizing a 3PL (third-party logistics provider), or zone jumping. Again, pick-ups can be made from a store or FedEx office, and discounted rates can be realized when shipped to a customer’s workplace.

COST-SAVING TIPS TO MINIMIZE PARCEL SHIPPING SURCHARGES Surcharges continue to have a draining impact on shippers’ bottom lines, but there are ways to stem the tide.

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ue to the increasing complexity of ground parcel shipping rates, it’s quite possible that many shippers may not be aware of the potential surcharges to which their packages are being subjected. According to the Reveel Group, a shipping logistics consultancy, approximately 35% of a company’s shipping expenses are surcharges. As a result, the impact to your bottom line can be significant. You may also be damaging the relationship with your customer, who may choose to look elsewhere to minimize shipping costs. Understanding what these surcharges are — and how they are applied — can

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be a powerful tool to help you potentially minimize costs and retain the business necessary to grow. We’ve identified three main areas of cost impact to support your planning. Let’s take a look at some scenarios of how those attributes drive the surcharges and the cost-saving alternatives for each situation. Additional Delivery Expenses First, it is crucial we understand the incremental cost surcharges to deliver the package. Residential delivery and delivery area surcharges impact any delivery to a location that is a home, including a business operating out of a home. Delivery area

Package Characteristics Several surcharges are related to the physical attributes of a package, such as: The dimensional weight surcharge is calculated in inches, as follows: length x width x height/139 (the standard divisor used by parcel carriers, rounded up). The dimensional weight is used as the billable weight when it is greater than the actual weight impact. } Impact per package: A maximum rate increase of 111% for a one-cubic foot box } Cost-saving alternative: Reduce box size. Evaluate alternatives such as kraft or poly mailers, mailer boxes, or a mailer automation. Also review your product size and any secondary packaging, such as a folding carton, to see if there are ways to reduce dimensions. The additional handling surcharge comes into play when the parcel weight is more than 70 pounds, the length is greater than 48 inches, or the package width exceeds 30 inches. This also impacts odd-shaped packages, such as those that are cylindrical, or products that are not fully encased in the outer carton, as well as soft-sided packs with dimensions greater than 18x13x5 inches. } Impact per package: $13.50 - $14.25


 Cost-saving alternative: Optimize the outer shipping container based on product fragility and network. Utilize multi-weight/freight by ground pricing when possible. Oversize/large surcharges come into play when the length is greater than 96 inches or the length + girth is more than 130 inches (Girth = (2x width) + (2 x height)).  Impact per package: $90 -$115 The unauthorized/over max surcharge applies when the weight is greater than 150 pounds, the length exceeds 108 inches, or the length + girth is more than 165 inches.  Impact per package: $675 - $850  Cost-saving alternative: Ship lessthan-truckload (LTL) network/split shipment (utilize multi-weight or freight by ground pricing). Value-Added Surcharges There are several surcharges related to the non-transportation services provided by carriers.

The address correction surcharge is incurred when the shipper provides an inaccurate or incomplete address.  Impact per package: $14 – $16  Cost-saving alternative: Flag customers to avoid repetition, implement software solutions to catch and correct incorrect information. The third-party billing surcharge occurs when any shipment is charged to a thirdparty account unrelated to the shipper.  Impact per package: 2.5%  Cost-saving alternative: Add the fulfillment facility to a master account so that the original shipper is charged, eliminating the third-party fee. Also, consider drop shipping to further reduce costs. The declared value surcharge translates into the maximum carrier liability for lost or damaged products.  Impact: Between $0.90+ per $100 ($3 minimum)  Cost-saving alternative: Is it worth adding a liability amount to the

parcel? Evaluate claims filed and paid against the cost of declared value premiums, external insurance, etc. to determine viability. Summary As you can see from the scenarios and discussion above, base rates account for only a portion of your parcel spend. It’s critically important to understand what’s driving your parcel expenses prior to implementing cost-saving fulfillment alternatives or re-negotiating your contract terms with the carriers. Utilize operational factors to reduce parcel spend when applicable and analyze optimal fulfillment strategies. This means looking at the number of fulfillment centers, ship-from-store, 3PLs, and drop ship options at your disposal, and utilizing these options to provide cost-saving delivery options whenever possible.

Ivan Brewington is Director, Parcel Packaging Solutions at Pregis.

MARCH-APRIL 2019  PARCELindustry.com 29


5 TIPS FOR MAKING RETURNS PROCESSING

SMARTER, MORE EFFICIENT, AND COST-EFFECTIVE By Rafael Zimberoff

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eturns can be a thorn in the side of any shipper, no matter when in the year they may happen. Sure, there are certain times of the year that result in more returns than others (holiday rush, anyone?) but with

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the continued growth of e-commerce, companies are having to deal with more and more returns year-round. The peak season only adds to the complexity, as most merchants focus on fulfilling outbound sales during the holidays, letting the returns pile up until after the

rush. This approach can have a negative effect on their bottom lines, since less than half of returned goods are re-sold at full price. If a merchant wants to protect profits, waiting until after the holidays to deal with returned merchandise no longer works as a business model. Regardless of whether return shipments flow in during the holidays or not, the increasing number of these packages — and the erosion they can have on margins — makes it even more critical for companies to improve their returns processes. Strategies and technologies that standardize and automate workflows can help the returns department work at peak capacity at any point during the year, regardless of the sales surge. So, whether you are trying to simply get a handle on your current returns volume, or you are already thinking ahead to the 2019 peak shipping season (and the subsequent inbound package flow that inevitably follows), here are five tips to minimize the effect returns have on your company’s profits.


product the wrong size, damaged, or not as described?) — and by sharing this information organization-wide. Collect and analyze return reasons and trends: Invest in technology to help understand why one product is returned more often (e.g., size tends to run larger than labeled), better describe products, fine-tune inventory, or even drop products frequently damaged in transit. Develop a “reason for returns” report: Sort information by manufacturer and stock keeping unit (SKU) to support troubleshooting and help avoid future returns. This list improves future inventory selections by eliminating problem products that are frequently returned.

Create a unique record to make returns more transparent and enhance analysis. Creating a digital return record attached to the customer’s original order gives merchants several benefits and opportunities. Track the status of each return: Merchants can provide customers with timely updates at every stage, from receipt of merchandise to refund status. If a return arrives with no invoice number, advanced search features can help locate the order by customer name, address, or phone number. Prevent fraud: Keeping track of individual customer return profiles also helps the merchant prevent fraud by setting up alerts for customers with high return rates or open balances. “Reason for Returns” data improves processes and product offerings. There is a lot to be learned by asking why a customer wasn’t satisfied (was the

Keep goods handling and customer service separate. Creating a return process that separates reimbursement and inventory management helps retailers speed up both parts of the returns process. Process refunds as soon as the item is received: By separating the merchandise evaluation from the refund, the shopper is automatically reimbursed as appropriate. Some companies are even willing to give refunds before a product is received to keep customers happy and increase the speed of processing refunds. Restock merchandise to inventory immediately: Once returns enter the reverse logistics workflow, they need to be evaluated. If there is no damage, inventory can be updated immediately via a warehouse management system and made available again to all sales channels. Consider upping what is spent on return postage to get returns processed even faster. Classify returned merchandise for more efficient processing. It is helpful to classify returns immediately via simple mobile solutions with barcode scanning (e.g., needs repackaging, discount it, send it back to new inventory, recycle, or trash). Recycle or trash: Even identifying what to recycle or trash can save time and money because it limits the time spent on products that no longer have value. Use photos to aid in categorization:

Including photos of returned items with the customer’s return record can also speed the return classification process. Warehouse associates can even take pictures with their phones. While some merchants photograph every return, others only take photos if something is defective or damaged. Returns that require special treatment: Classification helps separate the small number of returns that do need special treatment for customer service attention. For example, was an item returned because it was damaged, worn, or defective? Those are the types of returns that would trigger special treatment. Rapidly return merchandise to the sales cycle. Today, returns are much more complicated, with many merchants selling online from multiple marketplaces to a wide range of geographic areas. Send returned products to the right reverse logistics channel: Whether it is recycling, trash, discount, or restock, identify which channel can best deal with the incoming returned merchandise. Automate processes and workflow: The goal of the reverse logistics team is to touch the returned product as few times as possible. Using workflow solutions to automate returns processing quickly means goods can be seen as available in inventory faster and approved for sale sooner to help generate revenue. To help protect profits, companies need to modernize their whole returns process from customer initiation to getting products back into the sales cycle when they still hold the most value.

Rafael Zimberoff is the founder of ShipRush, acquired by Descartes Systems Group, which provides on-demand, software-as-a-service solutions focused on improving the productivity, performance, and security of logistics-intensive businesses. The cloud-based ShipRush software solution helps small-to-medium e-commerce businesses and omnichannel retailers ship parcels efficiently and cost-effectively. MARCH-APRIL 2019  PARCELindustry.com 31


THE TOP KPIS TO KEEP IN MIND WHEN OPTIMIZING YOUR WAREHOUSE

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By Ed Romaine

arehouse optimization is all about making your operation as efficient, productive, and profitable as possible — in other words, doing more with less to increase your bottom line. It’s little wonder, then, that when many think about optimizing their warehouse, distribution center, or order fulfillment operation, their minds immediately go to upgrading or replacing old equipment with newer technologies that promise to do just that. While it’s true that upgrades and/or new equipment and systems can have tremendous impacts on your operation’s efficiency and profitability, new systems, in and of themselves,

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are not a silver bullet. There is important preparatory work that must be done if you are going to realize ambitious goals. One of the most important steps for you to take is understanding and recording your operation’s current performance as a benchmark so that you can accurately gauge the impact of every action you take moving forward. Understanding this impact will allow you to double down on what works, scale back on what doesn’t, and, simply put, use your capital and effort as efficiently as possible. “If You Don’t Measure It, You Can’t Improve It” While it might not be the sexiest business adage, this quote from Peter Drucker holds true even today. If your goal is to


make your operation leaner, more efficient, and more profitable, then you’ve got to know what your baseline performance is. Regardless of your industry, it’s nearly impossible to truly understand your strengths and limitations if you don’t undertake regular measurement and analysis. Doing so will help you:  Identify the areas of your business that are lagging behind and holding you back, allowing you to focus your improvement efforts where they will have the greatest impact  Identify the areas of your business that are outperforming others, allowing you to learn from your successes and implement similar processes elsewhere  Identify trends over time, allowing you to plan appropriately for the future Which Key Performance Indicators Should Form Your Benchmarks? The exact key performance indicators (KPIs) that you should focus your efforts on understanding will, of course, depend on the specifics of your operation, your industry, and the goals that you are trying to realize with your optimization efforts. That being said, there are a number of KPIs that all order fulfillment operations would benefit from regularly tracking and measuring — both before, during, and after any optimization work takes place. Generally speaking, these can be broken into four large buckets: customer metrics, inbound and outbound metrics, and financial metrics. Customer-focused Metrics This segment includes all factors that directly impact a customer’s satisfaction with your operation. These metrics are critical for you to understand because customer satisfaction determines whether someone becomes a repeat customer. Some of the most important customer-focused KPIs include:  On-time shipping percentage  Total order cycle time  Internal order cycle time  Perfect order percentage/order accuracy Inbound Metrics A frequently overlooked area of most operations’ performance is the flow of products coming into the warehouse; more specifically, the time required to receive, reconcile, and make products available to the fulfillment operation. These inbound metrics are essential to understanding the limits and strengths of your operation:  Dock-to-stock cycle time  Inbound orders received  Lines received and put away Outbound Metrics Within the outbound process, it is key to look at not only the velocity of orders, but also their completeness. Individual performance by function in the warehouse/DC can have a huge MARCH-APRIL 2019  PARCELindustry.com 33


impact on the overall labor hours required to process a set number of orders or lines. When we look at the specific rates in order fulfillment, where most of those hours are consumed in many operations, we can identify areas for improvement. Key areas to measure and understand in the outbound process include:  Fill rate for orders and line items  Orders picked per hour  Lines picked and shipped per hour Financial Metrics Efficiency and accuracy are the most important staples of any business model for almost every industry. But at the end of the day, it always comes down to the bottom line. The most important KPIs to measure the financial proficiency of an operation center around two crucial themes — distribution costs and inventory. The most important include:  Distribution costs as a percentage of sales  Distribution costs per unit shipped  Inventory days of supply In addition to these KPIs, you’d be wise to have some other data on hand before undertaking any kind of optimization work. The total number of stock keeping units (SKUs) housed and processed by your operation, your operation’s rate of SKU proliferation, and a firm understanding of your item master and average order profile should all be taken into account.

ARE YOUR COLLEAGUES There are undoubtedly people in your organization who need this information as much as you do. So if they are not already a subscriber,have them sign up for a FREE subscription today!

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Using This Data to Inform Your Optimization Efforts Once you have a picture of how your operation is currently performing in each of these areas, it should be relatively easy for you to pinpoint areas of weakness that could benefit from an upgrade or other optimization efforts. For example, if you find that your total order cycle time is not where you want it to be, you might try reducing travel time within your operation by leveraging goods-to-person or robotic solutions in your pick process. Whatever the case, it’s critically important that you regularly track and measure these KPIs, especially as you go through the work of upgrading and optimizing your operation. Without this regular benchmarking, it’s impossible to know exactly what impact your efforts are having, and whether you should replicate them in other areas of your operation (or in your other facilities).

Ed Romaine is VP of Marketing & Business Development, Conveyco (www.conveyco.com). He has over 30 years in helping organizations improve their order fulfillment and warehouse systems and processes including order picking, software, and conveyance technologies. He is also the former chairman of the Automated Storage & Retrieval Systems (AS/RS) group, the Supply Chain Execution Group (SCE), and Order Fulfillment Solutions Group (OFS) of America. Ed can be reached at eromaine@conveyco.com or 215.512.2613.


DIMENSIONAL WEIGHT: STILL A COST PROBLEM FOR MANY SHIPPERS

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imensional weight (also referred to as DIM weight, volumetric weight, or cubed weight) is the relationship of shipping box size to actual weight of the unit. Shipment pricing based on dimensional weight has been applied in air freight for many years because the amount of space utilized by a shipment was a bigger cost factor to airlines than the actual weight of the shipment. Think about something like ping pong balls,

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BY JACK AMPUJA which weigh virtually nothing no matter how many are shipped. Essentially, dimensional weight establishes a density factor that defines the ratio of shipping box size to its minimum weight. For example, parcel carrier giants UPS and FedEx use a density factor of 12 pounds per cubic foot. This, in turn, means that a box measuring one foot on all three dimensions must weigh a minimum of 12 pounds [1 x 1 x 1 = 1 x 12], while a box measuring two

feet on all three dimensions will have a minimum weight of 96 pounds [2 x 2 x 2 = 8 x 12] and so forth. If the actual box weight is under the established threshold, the box will be billed at the minimum; if actual weight exceeds the minimum, actual weight will drive the freight cost. In all instances, the parcel carrier will apply the higher cost. History of DIM Weight The application of dimensional weight migrated to ground parcel in 2013, at which time major parcel carriers set the target density at nine pounds per cubic foot. In 2015, target density was increased to 10 pounds per cubic foot,


and in 2016, it was raised again to 12, where it sits right now. Every time the density factor was increased, light-density shipments endured a price hike. Many parcel shippers have complained that the application of dimensional weight is just a money grab by the parcel carriers. On the other hand, carriers say they are merely attempting to apply true cost to their operations so more efficient shippers will pay less. It doesn’t take much math to compute the fact that DIM weight impact has increased by 33% in the past six years. With this kind of aggressive cost increase, it is no wonder that some perceive the pricing change as unfair. There is no doubt that the explosion of e-commerce sales changed the cost factors for carriers handling ground parcel shipments. Because dimensional weight was already being applied to air shipments, carriers were protected from those inefficient shipments. On

ground parcel operations, major carriers had always used weight as a cost base. When e-commerce brought in more and more light-density packages (many going to residential destinations), using weight as a cost base no longer made sense, hence the introduction of dimensional weight into the ground parcel segment. Up until now, shippers have had some relief on DIM weight pricing, as USPS had not implemented this pricing. However, late last year, the Postal Service announced that they were following other national parcel carriers and would begin charging for DIM weight on June 23 (at least this advanced notion gave shippers a chance to prepare for the change). Concurrently, USPS has also announced that their DIM weight factor will be 166, equivalent to 10 pounds per cubic foot, which is where the big parcel carriers were in 2015. So, while there will be cost pain for shippers of light-density boxes, it will not be as bad as UPS and FedEx, which currently

use a DIM factor of 139, equal to 12 pounds per cubic foot. The Importance of Efficiency While inefficient shippers are not fans of dimensional weight pricing, companies that are able to achieve density factors above the established threshold have not been impacted by DIM weight pricing. There are two factors that drive dimensional weight pricing: } The basic nature of the products being shipped; items composed of dense material such as glass, metal, stone, or rubber should easily exceed the density threshold. } The efficiency of packaging (how much filler and air is contained in the shipping case). While an item such as a hardcover book is inherently dense and should not be impacted by dimensional weight pricing, if it is shipped in a box triple the size of the book, the density

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factor may be so low that dimensional weight pricing will apply. Thus, the basic message being sent by parcel carriers to their shippers is that packaging efficiency has direct correlation to transportation cost. Feedback from small-package carriers and industry analysts indicates that many shippers have done little to change their shipping practices. Rather, they have elected to just absorb the higher freight cost associated with DIM weight pricing and to pass the cost on to their customers whenever they can. It is very likely that this lack of progress is due to shippers not knowing what specific steps to take to reduce the impact of DIM weight pricing. Unfortunately, many managers originally thought they could just negotiate their way out of this pricing. Others tried simplistic but ineffective changes, such as adding one or two additional outbound box sizes, asking box suppliers for advice [note: DIM weight is a freight cost issue, not a box construction problem], or using internal staff to run some kind of mathematical analysis. One entry-level packaging engineer who called me explained that she was comparing the internal dimensions of a box against the calculated cube of the product in each order. While the latter approach is on the right path, the optimal process entails millions of calculations that require a computer program to make any headway. DIM Weight in LTL Very recently, application of dimensional weight pricing has also leaked into the less-than-truckload sector. The freight classes defined by national motor freight classification hearken back to the 1930s, when Franklin D. Roosevelt was in office. The factors considered in assigning a National Motor Freight Classification (NMFC) freight class to a specific product are: } Product density } Product value and susceptibility to damage } Product handling characteristics; hard-to-handle items such as a mattress will get a higher rate 38 PARCELindustry.com  MARCH-APRIL 2019

} Product stowability characteristics (how easily the item can be loaded into a truck and how well it fits with other products; for example, a stepladder, being lengthy with open gaps, will get a higher rate) The logic gap that always existed in the NMFC freight classification system is that it is based on the product itself rather than how the product is packaged, so when a high-density product, such as a hardcover book, was shipped in an excessively large box, the shipper still got the benefit of the lower freight class while the carrier endured the brunt of inefficient packaging. When viewed in this light, one has to conclude that this is inherently unfair; the shipper who caused the problem suffers no adverse consequence, while the carrier who has no control over the packaging bears the negative impact. While the NMFC had a stated density for each freight class, it was impractical for carriers to measure it, and confronting customers about the issue was bad for business, so everyone just ignored the problem. Back to Basics E-commerce has caused a radical change, leading all parcel and LTL carriers to recognize the impact of density on shipping efficiency. What many have not realized is that the application of dimensional weight has served to shift responsibility and the cost of inefficient packaging from the carrier to the shipper because transportation cost is now based and invoiced on the freight class of the entire box and not just the product itself. While no announcement was made about this change in responsibility, this is one of the biggest changes that has ever impacted NMFC freight classes. How many shippers do you suppose added to their internal staff packaging engineers to simultaneously weigh and measure an entire pallet load of freight to deal with this added responsibility? I visit a lot of companies in my travels and have yet to encounter any business that has beefed up its internal packaging capability in response to this

responsibility shift. On the contrary, many large corporations had, at one time, significant staffing to work on packaging, but in recent years, most of them have cut back on packaging engineers in cost reduction efforts. One of the major drivers of DIM weight pricing was the development of dimensioners — measuring equipment that can simultaneously weigh, measure size, and calculate density of a shipping case or even an entire pallet of freight. Dimensioners gave carriers an easy-touse tool to measure density. Like parcel carriers, LTL truckers are quickly moving to DIM weight application. One 3PL told us that all of their LTL shipments are now getting DIM weight pricing. Most LTL carriers have invested in pallet dimensioners, so even if the carrier is not yet applying DIM weight pricing, the equipment is being used to evaluate pricing accuracy and identify inefficient shippers. Either path will result in higher rates for companies shipping excess void. LTL shippers actually get a double hit on DIM weight because pricing is based on both their ability to get good cube utilization on individual shipping cases and also on their ability to stack those boxes efficiently on a pallet. Loading voids, pallet overhang, or underhang all now work to the carrier’s advantage in pricing. So we are back to logistics basics: while the ability to increase the density of a specific product is limited, if not impossible, efficient packaging and pallet stacking should be in the scope of every shipper. Those companies that can package products and stack pallets better will see their efforts rewarded through lower freight costs. Laggards will continue to see their competitive positions fading due to inefficiency and higher costs.

Jack Ampuja is President, E-commerce Optimizers and Executive in Residence, Niagara University. Visit www.e-commerceoptimizers. com for more information.


By Will Bullington

LEVERAGING DATA TO PROPERLY INTEGRATE A NEW DC A new distribution center is often presented as a solution to current problems. However, it’s important to make sure the data supports the decision of adding to your network.

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our customers are expecting faster and faster delivery times each year, all while you are trying to cut costs, so network changes are often needed to increase shipping performance. Adding a distribution center (DC) will most likely decrease your average distance to your customers. However, to make adding a DC a profitable venture, you will need to leverage your data to properly integrate your new DC and monitor your new network.

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Identifying Your Goals Adding a DC to a network is a big decision with a lot of factors that need to be taken into account. Building a new DC is not necessarily going to reduce shipping costs in every case. To effectively implement a new DC, you need a clear understanding of the goals that are to be reached and how a new DC can help optimally achieve those goals. A significant amount of planning needs to be done on how to mitigate the cost impact, efficiently execute the plan, and monitor the DC’s performance

to ensure that it is running efficiently and achieving the desired goals. When adding a DC to a network, some common aims are to reduce time in transit and decrease shipping costs. While these two goals are not necessarily mutually exclusive, they do not always go hand in hand. Reducing time in transit is a natural goal among parcel shippers, due to consumers’ high expectations for faster delivery times. However, reducing the time it takes to ship packages to a customer can be an expensive proposition. According to the


GMT 2018 Benchmark Report, retailers see fast order fulfillment (two days or fewer) as the toughest challenge in terms of staying competitive and have identified it as a primary strategic focus. Essentially, every business is looking to decrease costs, and having a DC that is closer to the customer base can help with achieving this goal. After clear goals have been set, there needs to be planning regarding where the most optimal origin for the new DC is. The following planning steps should be taken to enact the plan, and the new network’s performance must then be monitored (see Figure 1). Leveraging Data for Dynamic Modeling To make adding a new DC a profitable venture, several considerations need to be made in the planning phase. When choosing an area to locate a new DC, real estate, labor, and operational costs need to be considered to ensure that the new DC will offset the cost to get it running by providing increased efficiency

Figure 1

and reduced transit times. Additionally, the relative location of your customer base is a large factor due to the goal of reaching the most customers in the fewest number of days. An effective way of testing how much a location would reduce your transit time and cost would be through implementing data analytics. Re-zoning and re-rating can be done to determine the cost difference of shipping with and without your proposed

DC. Considerations should be focused on the best implementation strategy for carriers and selecting the optimal service levels that the DC will provide to meet the customer demand. The data analytics portion of planning requires a significant amount of processing and data cleansing. With clean data and the ability to process millions of shipments, zones need to be calculated for multiple

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candidate locations for comparison. After re-zoning and re-rating have been done, the data needs to be validated in order to compare the potential new DC locations. Validation that packages have been re-zoned and re-rated properly for the candidate locations is important to make certain that the answer the data is pointing to is accurate. There will likely be ties in transportation costs between current DCs and the selected candidate DCs. Where these ties occur, operational costs can be weighed to break them and allow for some flexibility in the network. Considerations for the Execution Phase After sufficient analysis and planning have been done, it is time for you to move on to the execution phase. No matter how good a plan is, if it is not executed properly, it is doomed to fail. Important things to consider at this stage include what carriers to utilize with the new DC,

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how to allocate the order process, and how to select the right service. The final step in the cycle is to monitor how well your plan is going. Things could start off going according to plan but spiral out of control given some time. This is where data analytics comes back into play. Monitoring whether or not the new DC is improving efficiency and reducing cost will help to ensure that the DC is still progressing towards the original goals. Some specific things to monitor are the cost impact of the additional DC and how well it is staying within the budget that was created in the planning phase. Also, the DC’s service levels and how effective the DC is at delivering the promised performance to its customers should be monitored. Rate shopping is a powerful tool to help you drive towards the optimal shipment route and rate for shipments, and it is a way to ensure that a DC is continuously improving. Another consideration should be how well the vendors supplying the

DC’s needs are complying with the shipping standards that were set up. Substantial planning regarding the best location for a DC can contribute to cost cutting and improving service levels. However, the plan has to be properly executed and the resulting network continuously monitored to achieve high performance and ensure that the original goals are met.

Will Bullington is a strategic solutions engineer at Green Mountain Technology (GMT), a parcel spend management service provider for shippers with over 10 million parcels per year. In this role, he partners with customers to provide GMT’s strategic Parcel Spend Management solutions, including network optimization, spend analytics, and contract management. Will has a Bachelor’s and Master’s degree in Industrial Engineering from Mississippi State University.


APPLICATION ARTICLE

to great lengths to impress and delight you—and you likely will buy from it again.

The Box Is Now the Store The e-commerce box is the modern retail store. In fact, you must consider the entire e-commerce eco-system to truly deliver an outstanding customer experience. The rise of e-commerce has encroached on traditional retail’s territory, but e-commerce is not the enemy of retail. If you own niche or smaller retail stores, you are in a good position. Leverage the e-commerce renaissance to your advantage. Here’s how: E-commerce drives more traffic to your store Employ a blend of digital marketing tools, local SEO strategies and geolocators to direct patrons to your brick & mortar base. However, when customers walk through the door, you have to impress them with a memorable experience. The goal is to convert customers into fans in your physical location, and then count on these fans to order more of your product online. This blended approach to shopping is going to enhance retail participation and brand value. The New York Times reports, “Forget e-commerce, or bricks and mortar, or even omnichannel sales; the new retail era is one anchored in ‘augmented retail,’ a blend of the digital and physical allowing a shopper to shift seamlessly between the two realms.”

From the website and delivery, to the package and return policy, be sure your marketing and supply chain departments have scruitinzed every touchpoint if you intend to compete in the Amazon jungle. If people can’t visit your store, bring the store to your people Whether you have a brick & mortar location or operate exclusively as an online marketplace, your treatment of e-commerce should be the same—your website is another “store” and should be given as much thought and care as the traditional storefront. According to a recent Forbes article, “No matter if we’re shopping in showrooms or picking out items virtually from home, the experience will always make a difference.” E-commerce is your friend, not foe We’re taught not to judge a book by its cover, but we still do. And you can bet your customers will judge your brand by the box it arrives in. They will also judge your product by the entire shopping experience. The opportunity in e-commerce is yours for the taking, if you implement the right decisions for the right audience. The retail sector isn’t crumbling, it’s maturing. Pressure from other e-commerce companies are giving you the chance to offer a more compelling value proposition. Visible helps traditional retail, as well as online marketplaces, leverage e-commerce by helping them design smart processes and delivery strategies. Our experts can show you how to get more out of retail by giving more to the people who purchase and love your products. We exist to help you build memorable e-commerce experiences for your customers and your brand.

The shipping experience is an extension of your brand From pre-purchase, to fulfillment, to fast delivery times, to the magical moment your customer unboxes your product, ensure your supply chain has been carefully examined in order to win market share in the hearts and minds of your customers. Consider what it feels like to receive an Apple product in the mail. Checkout was easy, shipping is free, and your package arrives quickly. Then, inside the shipper box, you discover a gorgeous white package that imparts luxury as you slide it open. This holistic experience demonstrates that the company went

877.901.4027 VisibleSCM.com


APPLICATION ARTICLE

See Something. Say Something. Choosing An Audit Partner By Hannah Testani

Today, shippers need to be nimble and must continuously analyze existing processes to optimize and stay competitive. This makes it critical to leverage the right partner to ensure wasteful spend doesn’t go unnoticed. While the vendor universe is large, technology is an increasingly disruptive force in an industry that has historically lacked investment. Only a small subset of parcel and freight audit providers can deliver the solutions to meet these needs and picking the right provider can make all the difference. So, what should you be looking for? The Freight Audit & Payment (FAP) Provider Checklist 1. Commitment to Technology Technology is the most critical component and is the starting point for all audit, reporting, and analytics capabilities. It should be obvious whether you’re dealing with a true technology company or a legacy “tech” business. 2. Robust Reporting, Analytics, and Optimization Tools Reporting, analytics, and optimization tools are critical and help you leverage your data to identify areas for efficiency gains and process improvement. Providers frequently sell more than they can deliver — so ALWAYS insist on sending actual data to see reporting and analytics relevant to YOUR COMPANY. If they can’t show you your data before you sign up, it’s a bad sign. (See #1) 3. Real-time Visibility To (Normalized) Data In addition to having robust analytics, your data is only useful if it’s normalized and up-to-date. Many FAP vendors take days, if not weeks, to get electronic data loaded, audited, and available for reporting. This should take minutes or hours. (See #1) 4. Carrier Collaboration & Exceptions Management Maintaining and improving carrier relations is critical to a shipper and should be equally important to an FAP provider. The wrong

provider can quickly destroy years of goodwill if they manage exceptions poorly and don’t prioritize carrier relations. A best-inclass provider makes life easy for carriers with a dedicated carrier portal to track and manage billing issues and payments. (See #1) 5. Global Single-Vendor Solution Being able to leverage one vendor for all transportation modes and regions has significant benefits outside of vendor management and all-in cost. A single vendor means a one normalized data warehouse allowing you to holistically analyze your entire network and spend. (See #1) 6. Bank-Backed Payment Processing The recent bankruptcy of IPS Worldwide served as a reminder of the risks associated with outsourcing payments to privatelyheld FAP companies. Payments should only be outsourced to publicly-traded — and highly regulated — financial institutions. Intelligent Audit, in partnership with Triumph Bancorp (Nasdaq: TBK), is one of only three FAP providers with bankbacked payments. 7. Client Success While technology is the backbone of any good FAP provider, technology alone doesn’t make it a SOLUTION. A best-in-class FAP solution combines technology with dedicated strategic account advisors who act as an extension of your team — proactively analyzing your data, identifying issues, and helping you become a better shipper. Hannah Testani, Chief Operating Officer at Intelligent Audit, has over a decade of experience helping Fortune 500 companies leverage their data to ship smarter.

htestani@intelligentaudit.com 201.880.1110 ext. 121 www.intelligentaudit.com


WRAPUP

THE POWER OF PERSONAL RELATIONSHIPS Michael J. Ryan

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he parcel industry has gone through many changes over the years. As of now, the domestic services are dominated by FedEx, UPS, and the USPS, while the international arena is primarily dominated by DHL (although there are many regional competitors). Regardless of who is at the forefront of which market, we have seen a transformation of how personal relationships are developed and managed within the industry. Let’s take a look at how this has impacted us. Enterprise Accounts Most large shippers are handled by national account managers and global account managers. These are some of the best and brightest sales professional in our industry. The carriers have invested heavily into their development, and these managers have come up the ranks, developing skills

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that allow them to be trusted advisors to their customers. Most shippers have developed win-win relationships with these people, as these sales executives have astute skills in understanding their customers’ supply chains not only today but into the future, as well. They have also mastered the capabilities of their own organization and how they can mutually benefit each other. SMBs In contrast to enterprise accounts, small- and medium-sized businesses (SMBs) have not received the personal attention they deserve. In most cases, these accounts are handled through inside sales organizations, which tend to have high turnover rates. This becomes an impediment to a successful personal relationship. I am not saying that two organizations cannot have a great relationship solely over the phone, but it has been proven time and time again that there is no substitute to in-person relationships. I would encourage all the carriers to take a hard look into this segment of the industry. The low-volume shippers can be the most profitable customers for the carriers. All of the major carriers have reseller organizations that represent them with the smaller shippers, but most of the clients are handled by the carriers directly. Future Solutions The carriers may want to look

into expanding their respective sales organizations and get closer to this often overlooked segment of the business. The carriers may also want to look at expanding their reseller organizations so they can get to that personal relationship. There is no question that there is an investment in people and training required to achieve this. There is also an opportunity for the shipping community to start asking for this. The industry is becoming more complex, and the rise of rate shopping on multi-carrier systems is making it easier for the shipper to be less committed to their primary carrier. One way to combat this loss of volume is by developing a deeper relationship with the shippers that utilize the carrier’s services. There is a new competitor developing out there: Amazon’s new service, called Shipping with Amazon (also known as SWA). They will use the power of technology and personal relationships to develop this new service. It is the power of the relationship that drives the success of the partnership. Who will master this concept first? Only time will tell.

Michael J. Ryan is the Executive Vice President at Preferred Shipping (www.preferredship. com) and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or michael.ryan@ preferredship.com .


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